ICO v. Boeing: Trial Court Reduces $237 Million Punitive Damages Award to $207 Million

Last October we reported on the massive $631 judgment against Boeing in a lawsuit brought by ICO Global Communications Ltd., a satellite communications company. According to the Seattle Post-Intelligencer, superior court judge Emilie Elias ruled on Boeing's post-trial motions last Thursday.

The P-I reports that Judge Elias rejected most of Boeing's arguments, but she vacated one finding that Boeing's satellite unit, Boeing Satellite Systems, was liable for fraud and negligent misrepresentation. She upheld the jury's award of $279 million in compensatory damages for breach of contract and a separate award of $91.6 million for fraud and misrepresentation. She also upheld $177 million in punitive damages against Boeing, but halved the $59 million in punitive damages against the satellite unit because of the vacated jury finding.

With $577 million of the judgment still intact, something tells me there will be an appeal. If the Court of Appeal were to affirm the punitive damages award, it would apparently be the sixth largest punitive damages award to survive appeal in the U.S.

McCoy v. Progressive West: Court of Appeal Affirms $100,000 Punitive Damages Award for Insurance Bad Faith

The California Court of Appeal (Second Appellate District, Division One) issued this published opinion affirming a $100,000 punitive damages award. The opinion was originally unpublished, but the court ordered publication yesterday, in reponse to a publication request submitted by the Consumer Attorneys of California.

The defendant's only challenge to the punitive damages award was that punitive damages are unavailable in breach of contract actions. The Court of Appeal rejecting that argument, citing previous cases that have allowed punitive damages for bad faith breach of an insurance contract.

The court did not address Civil Code section 3294, which provides that punitive damages are available only for "the breach of an obligation not arising from contract." That language suggests that punitive damages should not be available for tort claims (like insurance bad faith) that are based entirely on the breach of a contractual obligation. Although several Court of Appeal opinions have affirmed punitive damages awards in insurance bad faith actions, none of those opinions have reconciled that result with the language of the statute.

UPDATE: I didn't notice this the first time around, but the publication order only applies to certain portions of the opinion. The punitive damages discussion remains unpublished.

Pakravan v. Halajian: Unpublished Opinion Affirms Order Vacating $205,000 Punitive Damages Award

The California Court of Appeal (Second District, Division Seven) issued this unpublished opinion affirming a trial court order that wiped out a $205,000 punitive damages award.

The jury awarded no compensatory damages to the plaintiff, and then awarded $205,000 in punitive damages. The trial court granted judgment notwithstanding the verdict on the ground that a punitive damages award cannot stand without some award of compensatory damages.

The Court of Appeal affirmed, relying on the California Supreme Court's decision in Mother Cobb's Chicken v. Fox (1937) 10 Cal.2d 203, which held that "actual damages must be found as a predicate for exemplary damages." The court rejected the plaintiffs' argument that Mother Cobb's Chicken has been undermined by subsequent Court of Appeal decisions. The court noted that most of the plaintiffs' authorities predate two recent Supreme Court decisions - - Kizer v. County of San Mateo and Potter v. Firestone Tire & Rubber Co. - - which reaffirmed the rule of Mother Cobb's Chicken. The court also rejected the plaintiffs' attempt to justify the punitive damages award based on "presumed" compensatory damages.

The plaintiffs in this case are certainly not the first to attack the continuing validity of the rule in Mother Cobb's Chicken. Because this is a recurring issue, the court probably should have published this opinion.

News Round-Up: Punitive Damages Verdicts

From the LA Times:

Man who was falsely accused of murder wins $1.1 million in compensatory damages and $150,000 in punitive damages

From Mercury News.com:

Woman who was exposed to genital herpes by 77-year-old man wins $5 million in compensatory damages and $2.75 million in punitive damages

From Newsday.com:

Female police officer wins $1 million in compensatory damages and $500,000 in punitive damages for sexual discrimination

Bregante v. Steinberg: Unpublished Opinion Affirms Trial Court's Decision Not to Award Punitive Damages

The California Court of Appeal (Sixth District) issued this unpublished opinion affirming a trial court's decision not to award punitive damages after a bench trial.

In affirming the trial court's decision, the Court of Appeal noted that, under California law, "even where the plaintiff prevails in a case where punitive damages are permissible, the plaintiff 'is never entitled to them. The granting or withholding of the award of punitive damages is wholly within the control of the [the trier of fact]....'" (Citing Brewer v. Second Baptist Church of Los Angeles (1948) 32 Cal.2d 791, 801.)

Kozicki v. Craig: Unpublished Opinion Reduces $100,000 Punitive Damages Award to $3,600

The California Court of Appeal (Fourth District, Division One) issued this unpublished opinion reducing a punitive damages award in an appeal from a default judgment. The court concluded that the record would not support a punitive damages award more than $3,600 - - six times the compensatory damages of $600. The court did not invoke the U. S. Supreme Court's statement in State Farm v. Campbell that the ratio of punitive damages to compensatory damages can exceed single digits in cases involving "unusually small" compensatory damages.

USAA Settles Appeal From $3.5 Million Punitive Damages Award

Last April we blogged about a $3.5 million punitive damages award against USAA in an insurance bad faith case in San Diego. The case generated a fair amount of publicity because the plaintiff was a Marine captain serving in Iraq. USAA appealed from the judgment, but the online docket reveals that a notice of settlement was filed on February 20.

Blanks v. Seyfarth Shaw: $15 Million Punitive Damages Award Reversed

The California Court of Appeal (Second District, Division Three) issued this published opinion last week, reversing a $15 million punitive damages award in a legal malpractice action brought by Tae Bo creator Bill Blanks against the law firm Seyfarth Shaw and one if its partners, William Lancaster.

The opinion doesn't contain any analysis of punitive damages issues per se, because the court found that the entire judgment had to be reversed due to instructional errors committed by the trial court during the liability phase of the trial. Nevertheless, we thought the opinion merited a brief mention here because the $15 million punitive damages award was one of the largest punitive awards generated by the California courts in 2005, and the total verdict was the 7th largest that year.

Editorial Touts Deterrent Effect of Punitive Damages

The South Carolina legislature is considering a proposal to cap punitive damages at $250,000. This editorial in the Greeneville Times criticizes that proposal, arguing that punitive damages are necessary to deter corporations from distributing products that a dangerous to the public.

The editorial cites the salmonella contamination scandal involving Peanut Corporation of America (in neighboring Georgia) as an example of the sort of corporate behavior that punitive damages deter. That seems like an odd example. Georgia law allows punitive damages, and has no cap on punitive damages in products liability cases. In other words, the Peanut Corporation of America was exposed to claims for punitive damages up to the maximum amounts permitted by the Due Process Clause. Indeed, someone has already sued PCA for punitive damages. Apparently, the possibility of a large punitive damages award did nothing to deter PCA from shipping tainted products. Does that example really support the editorial's argument?

Whenever a state considers imposing caps on punitive damages, opponents tout the deterrent value of punitive damages and argue that the state will become more dangerous for consumers if the cap is adopted. Someday, someone will conduct a study comparing the states that have adopted caps (or have outlawed punitive damages altogether) with the states that haven't, to determine whether citizens in the uncapped states really are safer.

Tobacco Plaintiffs Recover $5 Million in Punitive Damages

Bloomberg reports that the jury in the Hess retrial awarded $3 million in compensatory damages and $5 million in punitive damages, a far cry from the $130 million the plaintiffs requested. Altria Group, Inc., the parent company of Philip Morris, says it will appeal.

Tobacco Plaintiffs Seek $100 Million in Punitive Damages

The plaintiffs in Hess v. Philip Morris, which we blogged about last week, have asked the jury to award $30 million in compensatory damages and $100 million in punitive damages.

As readers of this blog know, punitive damages awards of that size rarely survive appeal. But it's possible that the plaintiffs are asking for such a large number because they know, as the Cal Biz Lit blog has pointed out, that statistical studies show that a large request for punitive damages is the most significant predictor of a large punitive damages award. So the plaintiffs may not get $100 million, but they'll get more than they would have gotten if they had asked for something less.

Utah District Court's Order Reducing $63 Million Punitive Damages Award Now Available

As a follow-up to last week's post about the District of Utah opinion that cut a $63 million punitive damages award to $3.6 million (for a 1-to-1 ratio with the compensatory damages), here's a link to the copy of the opinion. The punitive damages discussion begins on page 15. The Westlaw citation is 2009 WL 361267.

In addition to the ratio analysis, the opinion is interesting because it highlights a significant difference between Utah law and California law. Unlike California, Utah does not require plaintiffs to present evidence of the defendant's financial condition as a prerequisite to obtaining a punitive damages award. Accordingly, the district court here rejected the defendants' argument that the plaintiffs failed to introduce sufficient evidence of the defendants' financial condition, even though that argument likely would have succeeded in California.

Utah District Court Cuts $63 Million Punitive Damages Award to $3.6 Million

The Salt Lake Tribune reports that U.S. District Judge Tena Campbell has dramatically reduced a jury's punitive damages award in a lawsuit between two rival insurance companies. The jury awarded $63 million in punitive damages but Judge Campbell, in response to the defendant's post-trial motions, reduced the punitive damages to $3.6 million, equal to the amount of the jury's award of compensatory damages.

As we have observed, a greater number of courts have been limiting punitive damages to a one-to-one ratio recently, at least in cases involving substantial compensatory damages awards. I have written a short paper on this topic which will be published by the Washington Legal Foundation later this month.

La Baw v. Campbell: Court of Appeal Vacates $100,000 Punitive Damages Award Against Defendant With Negative Net Worth

In this unpublished opinion, the California Court of Appeal (Fourth District, Division Two) vacated a punitive damages award of $100,000 because the defendant could not afford to pay.

We have previously blogged about California's rather unique rule that plaintiffs seeking punitive damages must present evidence of the defendant's financial condition. As we observed, California plaintiffs routinely overlook this rule and end up losing their punitive damages awards on appeal.

Even when plaintiffs do meet their burden, California courts will reduce punitive damages awards that are disproportionate to the defendant's ability to pay. For individual defendants, the courts have adopted a rule of thumb that any award that exceeds 10 percent of the defendant's net worth is excessive. (See Michelson v. Hamada (1994) 29 Cal.App.4th 1566, 1596.)

This case is a little unusual because the evidence showed that the defendant had a negative net worth. He testified that his debts exceeded his assets, and the plaintiff presented no evidence to the contrary. The court therefore concluded that the defendant is unable to pay any punitive damages award. It vacated the award in its entirety and did not afford the plaintiff a new trial on this issue, because she had a full and fair opportunity to present her evidence in the first trial. (See Kelly v. Haag (2006) 145 Cal.App.4th 910, 914.) That aspect of the opinion conflicts with this recent unpublished decision, in which the Court of Appeal inexplicably gave the plaintiff a second chance to present evidence of the defendant's financial condition after failing to do so the first time around.

Jury Rules For Plaintiff in First Phase of Retrial After Reversal of $145 Billion Punitive Damages Award

The Associated Press is reporting that a Florida jury ruled in favor of plaintiff Elaine Hess in the first phase of the first trial in a series of cases brought by 8,000 Florida smokers. The jury ruled that the plaintiff's husband, Stuart Hess, a longtime chain smoker, was addicted to nicotine before he died of lung cancer. The trial will now consider the issues of liability and, if necessary, damages.

As we noted here, these cases are the result of the failed Engle class action, in which Florida smokers collectively obtained an award of $145 billion in punitive damages, the largest civil award in U.S. history. In 2006, the Florida Supreme Court overturned that award, ruling that the plaintiffs had to prove individually that cigarettes caused their illnesses.

Hat tip: How Appealing

Georgia Jury Awards Punitive Damages Against California Corporation

The Atlanta Journal-Constitution reports that a Georgia jury has awarded $250,000 in compensatory damages and $2 million in punitive damages against Vesta Strategies, a now defunct California investment company. According to the plaintiff's lawyers, Vesta defrauded victims nationwide and the FBI has opened an investigation.

If other plaintiffs come forward seeking punitive damages, this litigation could raise some interesting questions. Will the court in the next case take the first punitive damages award into account when deciding whether further punitive damages are appropriate? Will this become a race between plaintiffs, competing to see who can get a punitive damages award and enforce it before the company's assets are gone, leaving subsequent plaintiffs unable to recover their actual losses? Many law review articles have been written about the problems presented by punitive damages claims for mass torts, but the courts have yet to devise any workable solution.

"The Failure of Punitive Damages in Employment Discrimination Cases: A Call for Change"

This article on punitive damages in discrimination cases, which we blogged about last September when Prof. Seiner posted an advance copy on SSRN, has now been published in the latest edition of the William & Mary Law Review. The article is available on Westlaw and the citation is 50 Wm. & Mary L. Rev. 735.

NFL Players Association Appeals Punitive Damages Award

We previously blogged about a judgment against the NFL Players Association for $7.1 million in compensatory damages and $21 million in punitive damages. The Associated Press is now reporting (via ESPN) that the Players Association has filed a notice of appeal. Perhaps this case will give the Ninth Circuit an opportunity to clear up the confusion about its policy regarding the appropriate remedy for excessive punitive damages.

Hat tip: ProFootballTalk.com

Vermont Supreme Court Overturns Defense Verdict, Finds that Defendant Acted with Malice as a Matter of Law

The Vermont Supreme Court's opinion last week in DeYoung v. Ruggerio reached a highly unusual result for a punitive damages case.

The case involved a claim against an attorney who allegedly stole money from his clients and lied to them about it. A jury awarded compensatory damages but determined that the defendant did not act with malice and was therefore not subject to punitive damages.

The Vermont Supreme Court reversed, ruling that the defendant's conduct amounted to malice as a matter of law. Accordingly, the court sent the case back for a retrial on the amount of punitive damages. The court based its decision on the fact that the defendant admitted stealing plaintiffs’ money and lying to them. The defendant argued nevertheless that the jury could reasonably have found no malice because (1) he did not intend to harm them, and (2) he always intended to return the money to them sooner rather than later. But the court concluded that even if the jury accepted this explanation entirely, the defendant's conduct still satisfied Vermont's definition of malice, which includes "deliberate and outrageous conduct aimed at securing financial gain or some other advantage at another’s expense, even if the motivation underlying the outrageous conduct is to benefit oneself rather than harm another."

I don't recall ever reading any punitive damages opinion in which an appellate court concluded as a matter of law that a defendant acted with malice, and reversed a jury's determination to the contrary. But the Vermont Supreme Court's opinion cites two such cases: a 1989 decision from Alabama and a 1908 decision from Minnesota. (See Dependable Ins. Co. v. Kirkpatrick (Ala. 1987) 514 So. 2d 804, 806 and Anderson v. Int’l Harvester Co. of Am. (Minn. 1908) 116 N.W. 101, 102.) The fact that the Vermont Supreme Court had to rely on a 100-year-old case from another jurisdiction tells you that this doesn't happen every day.

Despite ruling that the defendant's conduct amounted to malice as a matter of law, the court emphasized that, during the retrial, the jury would still be free to decide not to award punitive damages.

Duffy v. Technicolor: Plaintiff Forfeited Punitive Damages By Not Seeking Them During First Phase of Trial

The California Court of Appeal (Second District, Division Three) issued this unpublished opinion last week, affirming a trial court's decision that prohibited a plaintiff from seeking punitive damages. In a nutshell, the plaintiff was barred from seeking punitive damages because he failed to make a timely request for punitive damages on any of the liability theories he presented to the jury.

The plaintiff's complaint asserted multiple theories of liability, but requested punitive damages only for intentional infliction of emotional distress. The trial court, however, granted a nonsuit on that claim prior to trial. The case went to trial, bifurcated into a liability phase and a damages phase. During the liability phase, the plaintiff did not ask to amend his complaint to seek punitive damages on the other claims, nor did he ask the jury to make a finding that the defendant acted with malice, oppression, or fraud. The jury found for the plaintiff on liability.

During the damages phase, when the plaintiff began to assert a claim for punitive damages, the trial court asked the plaintiff how he could obtain punitive damages when the complaint did not seek punitive damages on any of the theories the jury had addressed in the liability phase. The plaintiff then sought leave to amend his complaint to request punitive damages on one of the claims the jury had addressed. The trial court denied the request as untimely.

The Court of Appeal affirmed, finding that the trial court did not abuse its discretion. The court noted that a belated amendment of the complaint would have prejudiced the defendant, who might have adopted a different strategy during the liability phase, and might have presented different evidence, if the defendant had known the plaintiff was seeking punitive damages.

The court's reasoning makes sense, but it seems like the court could have affirmed on another more straightforward ground, without even going into a prejudice analysis. The plaintiff, by failing to obtain a finding of malice, oppression, or fraud during the liability phase, forfeited its claim to punitive damages as a matter of law. See Westrec Marina Management Inc. v. Jardine Ins. Brokers Orange County, Inc. (2000) 85 Cal.App.4th 1042, 1050. Under Westrec, it really wouldn't matter whether the plaintiff had been allowed to amend his complaint or not. Without a finding of malice, oppression, or fraud, no punitive damages could be awarded.